IFA and Pension fund management charges - transferring a DC workplace & private pension

DeadlyD

Albermarle said:

Do you have any view that Quilter with a BNY Mellon Multi Asset fund (not much idea what this is) would be a better bet for performance rather than say AJ Bell or Vanguard? 

As mentioned in the post above.

Try not to confuse two different things.

To use AJ Bell as an example.  AJ Bell is an investment platform. They offer thousands of different investments from hundreds of different companies. It is the investment you pick that performs, the platform is just an administrator.

What can confuse people is that they also offer a small number of AJ Bell branded funds, but there is still a split between the platform and the funds.

In the end if you buy Investment A on any platform, it will perform exactly the same regardless of which platform you use.

Yes understand - since being educated on this Forum - thanks all! But the BNY Mellon Multi Asset fund is what I'm questioning. As if the multi asset fund is performing at say 9% it would be worth me transferring and paying a management fee of 1.9% but if its only performing at say 2% I'm losing money in Yr1 and the more I'm looking at the Management Fees a SIPP is more and more attractive, looking at the Interactive Investor and for a 1st timer it looks pretty fool proof..

QrizB

DeadlyD said:

Yes understand - since being educated on this Forum - thanks all! But the BNY Mellon Multi Asset fund is what I'm questioning. As if the multi asset fund is performing at say 9% it would be worth me transferring and paying a management fee of 1.9% but if its only performing at say 2% I'm losing money in Yr1 and the more I'm looking at the Management Fees a SIPP is more and more attractive, looking at the Interactive Investor and for a 1st timer it looks pretty fool proof..

On one hand, I would be very suspicious about anyone (including yoour (I)FA) telling you that the BNY Mellon Multi Asset fund will return 7% with a potential upside to 9.8% (per your opening post). They can't guarantee that, it depends on the performance of the investments.

On the other hand, you are likely to find that you can hold exactly the same fund in a SIPP without paying (most of) the 1.9% management fee.

BNY Mellon offer several multi-asset funds. Do you know exactly which fund has been proposd to you?

Bostonerimus1

DeadlyD said:

UPDATE - Dear Forumites,
I have 2 quotes from IFA's - one a well known wealth management company in my County and another sole trader - I've discounted the latter for various reasons, not least trying to charge me for advice but anyway I've been through the charges;- 

1.  transfer of the L&G approx £200k (I'm leaving the SJP until Oct 24 due to early withdrawal charges) are 1.75% (I'm OK with that) -
2. 0.75% IFA management charge - OK 
3. recommendation Quilter and fund management = 1.15%

Overall Per annum management charges are 1.90% 

As I will be drawing down by UFPLS my tax free allowance and 25% = £16,760 pa, I will be paying nearly £4k (yr1 but obviously 1.90% on total funds) on management fees on a proposed 7% increase on funds. Risk category 7 
Now I'm concerned that on the L&G approx £200k transfer the charges of nearly 2% per annum 

My SJP is 1.72% which I thought was expensive on £140k 

I understand the value of management from the IFA, but my affairs are relatively simple and I have the time now to manage myself, being retired. 

I'm rather afraid of SIPP's but is there a simple "packaged" pension that would provide the same type of return - 7% or forecast as a 7 cat risk @ 9.8% pa OR am I paying for that expertise in the fund management of Quilter for that good % return. 

TIA! Deadly 

Let's just put that 1.90% annual management charge in perspective!

A Sustainable Withdrawal Rate for your DC pension might be somewhere between 3% and 5% given all the usual factors. So a 1.9% annual fee means that about 50% of your DC pension income will be spent before you have bought a crumb to eat or paid for a single kilowatt hour. If you take 4% each year from your 200k DC pension that will be 8k and you will be paying 3.9k in fees leaving you just 4.1k to spend on yourself. Such fees severely limit the spending ability of people who depend on DC drawdown and they will have to be paid whether you have lost or made money and so can eat away at your capital at the worst of times. 7% return might be what you get over the long term, but the annual volatility of that return is what you really have to plan for.

Qyburn

DeadlyD said:

Yes understand - since being educated on this Forum - thanks all! But the BNY Mellon Multi Asset fund is what I'm questioning. As if the multi asset fund is performing at say 9% it would be worth me transferring and paying a management fee of 1.9% but if its only performing at say 2% I'm losing money in Yr1 and the more I'm looking at the Management Fees a SIPP is more and more attractive, looking at the Interactive Investor and for a 1st timer it looks pretty fool proof..

What's the selling point for that fund compared to the Vanguard Lifestrategy series (which seem to be the most frequently mentioned)? Or HSBC Global Strategy which some on here prefer.

dunstonh

Qyburn said:

DeadlyD said:

Yes understand - since being educated on this Forum - thanks all! But the BNY Mellon Multi Asset fund is what I'm questioning. As if the multi asset fund is performing at say 9% it would be worth me transferring and paying a management fee of 1.9% but if its only performing at say 2% I'm losing money in Yr1 and the more I'm looking at the Management Fees a SIPP is more and more attractive, looking at the Interactive Investor and for a 1st timer it looks pretty fool proof..

What's the selling point for that fund compared to the Vanguard Lifestrategy series (which seem to be the most frequently mentioned)? Or HSBC Global Strategy which some on here prefer.

Its a good question.   The OP doesnt say which risk level.   So, I have gone for the statistically most likely with the balanced version.
That has an OCF of 0.84% compared to 0.22% For VLS60.  So, VLS is cheaper.
Long term performance of VLS has been better.  120% since launch vs 112% on the BNY fund over the same period.

However, the VLS range has been weak in this cycle.   5 year performance for VLS60 is 24.01% vs 44.89% for BNY.

That makes sense as the rigidity of the VLS range would work well in positive periods but suffer in negative periods where a particular asset class is in trouble.  A more fluid option can often do better in that short term period.

DeadlyD

Thanks all for the comments, articles and constructive educational points helping me reach a decision for my life savings - a pension fund! I obviously want the best outcome and I've slowly gained confidence through understanding & learning the different financial blurb, DC's / DB's, FA's, IFA's,  what platforms and funds are, the list goes on. I'm getting there so thanks for your patience @xylophone & @dunstonh @Albermarle in particular! & @bostonerimus for the sense check 
So update - I've decided to keep my hard earned cash saving over £7k this year and not transfer but take out a UFPLS amount of £16,760 for FY23/24 using my tax free allowance of £12,570 & the 25% tax free amount of £4,190 from the L&G workplace. Then transfer this to a SIPP - exciting! I've spent 2 days reading up on SIPP's, I think as a novice the Interactive Investor looks a fairly good platform - I'm yet to work out funds but looks like some of these are passive (I know I'm doing pretty well on this stuff right!) and obvs needs a lot more research... I feel comments coming on here  
A question for you -  I'm going to do the UFPLS from L&G - should a transfer be relatively straightforward or does it complicate matters if I withdraw from the L&G fund or is it just more complicated if its a drawdown fund? 
And my risk profile was a 7 - @dunstonh asked previously.
Thanks Deadly 

MallyGirl

are you still working? You are limited on pension contributions by your earned (not pension) income.
This is different from a transfer which is what you started out discussing.

xylophone

are you still working? 

OP, earlier in the year you said

https://forums.moneysavingexpert.com/discussion/6454911/updated-after-seeing-ifa-before-i-drawdown-l-g-pension-sjp-keen-to-combine

I volunteer and have retrained but don't expect to earn much if at all. I don't intend to drawdown until next financial year (58yrs). 

One of  your pensions is with L&G (valued at around £193,000). You propose taking benefits from this pension as UFPLS in the next financial year.

You should check with L&G that the pension plan  you have supports UFPLS.

 You say that you will open a SIPP  (which is fine) but as it seems that you  will not have any relevant earnings, you will be limited to the amount  you can contribute to the SIPP and receive tax relief.


See   Basic  amount here

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

You would contribute £2880 to the SIPP and the provider would claim tax relief of £720 and add it to your pot.

Are you doing this so as to have a small amount in a SIPP that you can use to buy funds for pension management practice?

DeadlyD

xylophone said:

are you still working? 

OP, earlier in the year you said

https://forums.moneysavingexpert.com/discussion/6454911/updated-after-seeing-ifa-before-i-drawdown-l-g-pension-sjp-keen-to-combine

I volunteer and have retrained but don't expect to earn much if at all. I don't intend to drawdown until next financial year (58yrs). 

One of  your pensions is with L&G (valued at around £193,000). You propose taking benefits from this pension as UFPLS in the next financial year.

You should check with L&G that the pension plan  you have supports UFPLS.

 You say that you will open a SIPP  (which is fine) but as it seems that you  will not have any relevant earnings, you will be limited to the amount  you can contribute to the SIPP and receive tax relief.


See   Basic  amount here

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

You would contribute £2880 to the SIPP and the provider would claim tax relief of £720 and add it to your pot.

Are you doing this so as to have a small amount in a SIPP that you can use to buy funds for pension management practice?

Morning, I have finished work and will not contribute further into a pension. 
After a conversation with L&G I am advised that I would be able to withdraw a partial lump sum which the first 25% is tax free. They would not describe this as a UFPLS, there are 3 options -
 1. withdraw a lumpsum or partial lump sum (1st 25% tax free) 
 2. Flexible income - drawdown with a tax free amount (full or partial) 
 3. Annuity 
I laboured questioning over option 1 that it was a UFPLS and they concurred it was an uncrystalised fund. So I am assuming this is a UFPLS transaction. They agreed I could transfer but a drawdown would need to go into a drawdown account. 
I was intending to transfer the full L&G pension £195k into a SIPP possibly Interactive Investor. Are you saying this isn't wise or there is a better more tax efficient way?

xylophone

I was intending to transfer the full L&G pension £195k into a SIPP possibly Interactive Investor. 

I feel as though we are at cross purposes here.

Why would you be trying to take money from L&G first?

Would it not be easier to ask II to arrange the transfer of L&G to II and then take the UFPLS from II?